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Bitcoin puts Salvadoran banks at risk of money laundering and terrorist financing: Fitch

Jun 25 (.) – El Salvador’s law converting bitcoin into legal tender means banks face heightened risks, including violating anti-money laundering and terrorist financing rules, the agency said. Fitch rating in a report on Friday.

The Bitcoin decision, which will take effect on September 7, “would increase regulatory, financial and operational risks for financial institutions, including the possibility of violating international standards against money laundering and terrorist financing,” he said. Fitch.

The possibility of using bitcoin for all obligations, including bank loans, could channel cryptocurrency traffic through the country, which “may increase the risks that proceeds from illicit activities will pass through the Salvadoran financial system.” Fitch said.

Salvadoran President Nayib Bukele said Thursday that the use of bitcoin will be optional, meaning that anyone who receives a payment in the cryptocurrency can choose to automatically convert it into US dollars, the legal tender in El Salvador for the past two decades.

Fitch added that regulations must fully comply with global standards set by the Paris-based Financial Action Task Force, as “Bitcoin’s lack of transparency could increase the risk of money laundering.

Bukele has touted the advantages of bitcoin for international transfers, which are key in a country like El Salvador, where a fifth of gross domestic product in 2019 was tied to money sent by workers abroad, according to the World Bank.

(Report by Rodrigo Campos; Edited in Spanish by Javier López de Lérida)

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